Inter-American Development Bank
facebook
twitter
youtube
linkedin
instagram
Abierto al públicoBeyond BordersCaribbean Development TrendsCiudades SosteniblesEnergía para el FuturoEnfoque EducaciónFactor TrabajoGente SaludableGestión fiscalGobernarteIdeas MatterIdeas que CuentanIdeaçãoImpactoIndustrias CreativasLa Maleta AbiertaMoviliblogMás Allá de las FronterasNegocios SosteniblesPrimeros PasosPuntos sobre la iSeguridad CiudadanaSostenibilidadVolvamos a la fuente¿Y si hablamos de igualdad?Home
Citizen Security and Justice Creative Industries Development Effectiveness Early Childhood Development Education Energy Envirnment. Climate Change and Safeguards Fiscal policy and management Gender and Diversity Health Labor and pensions Open Knowledge Public management Science, Technology and Innovation  Trade and Regional Integration Urban Development and Housing Water and Sanitation
  • Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Beyond Borders

  • HOME
  • CATEGORIES
    • Asia – LAC
    • Innovation and Technology
    • Investment Attraction
    • Public-Private Alliances
    • Regional Cooperation
    • Regional Integration
    • Trade & Investment Agreements
    • Trade Facilitation
    • Trade Promotion
  • Authors
  • Spanish

Miles of Red Tape and Piles of Paperwork: How We Can Simplify Labyrinthine Borders and Bring Countries Closer to International Markets?

July 18, 2017 by Christian Volpe Martincus Leave a Comment


In April 2010, the Eyjafjallajökull volcano erupted in Iceland, ejecting an ash cloud that shut down European airspace for days. Transatlantic air shipments of key manufacturing inputs were significantly delayed, which caused production to be put on hold in several US automobile factories. Interruptions like these incur major costs that often go far beyond the market value of the components in question and may be transmitted along the whole value chain. The Eyjafjallajökull eruption clearly demonstrates the importance of just-on-time deliveries in a world in which productive and commercial processes take place in different locations. It also highlights why punctuality is a core factor that firms need to take into account when deciding which other companies to establish trade relations with.

The time it takes for goods to travel from their point of origin to their final destination can usually be broken down into the time needed to transport the good from the factory to the port, airport or border-crossing; the time the good spends at the border; and the time it takes for it to be shipped abroad. Although a series of studies have demonstrated how domestic and international transportation times affect foreign trade, no studies to date have managed to adequately explain all the factors involved in time spent at the border and their implications. This has mainly been due to the absence of appropriate data which could be used to measure these times and assess their impact on trade.

The standard approach to measuring the total time needed to import or export goods (or to carry out some stages in these processes) has been to use survey-based country-level data from sources like the World Bank’s Doing Business report or its Logistics Performance Index. However, circumstances have changed radically with the advent of the new information systems being used by border agencies, including customs organizations and those responsible for sanitary matters, feeding, quarantining, security, and consumer protection. These systems generate real-time, high-frequency data that can be used to track all shipments through the various entry and exit procedures and to break time at the border down into the different relevant stages.

By combing through this data, we can establish whether time at the border represents a large share of the total time that it takes for a good to be shipped from its point of origin to its destination market. For example, the data on imports arriving in Peru by sea for 2013 reflect that the time that goods spent at the border represented an average 37.3% of the total time between their leaving the port in the country of origin and being released from customs. Likewise, port and customs procedures account for 21.9% of total shipping time. For 25% of shipments, total time at the border and going through port and customs procedures represented over 50% and 30% of total shipping time, respectively (figure 1.1).

Borders

This data demonstrates that, far from being linear and adimensional, borders are in fact dense spaces that are a region unto themselves. Crossing them entails a plethora of activities (such as loading and unloading, inspections, etc.) which are carried out by many different players (such as port operators and border agencies). More specifically, borders are overseen by agencies that design and apply regulations that firms must comply with and procedures that they have to implement if they want to trade internationally. The purpose of these regulations and procedures is to ensure security, safety, and legitimacy in general and compliance with fiscal rules in particular. However, the shape such institutional designs take can transform borders them into convoluted labyrinths that are time-consuming to cross.

The “thickness” of a border depends on a series of factors that include: (1) the number of government agencies involved in regulating cross-border transactions; (2) the coordination and articulation of these agencies and their regulations and procedures; (3) the design of these regulations and procedures (that is, whether they are straightforward or complex) and their specific features (for example, whether they are open 24/7 or just eight hours a day, the proportion of shipments that are subject to physical inspection, etc.); (4) the technology available for implementing the procedures in question (for example, whether customs declarations and forms are digital or paper-based) and whether there is interoperability, such that all agencies use the same forms or technology, or whether each uses its own; and (5) the existence of special regimes for firms, shipments, and trade flows, among other factors.

As a measure of border thickness, time at the border may vary for several reasons: (1) border agencies may adopt risk management systems to identify “suspect” shipments and assign them to different monitoring channels, such as document checks or physical inspections; (2) some firms are certified as reliable operators so their cargo is subject to fewer physical inspections and is dispatched more rapidly; (3) firms may be trading under standard or simplified regimes, such as exports shipped through the postal system; (4) some products require specific permits that may take longer to prepare and process, depending on whether there is a single window for foreign trade (VUCE); and (5) firms can ship goods through third-party countries via a chain of import/export procedures or under simplified, streamlined international transit regimes.

Risk management systems, authorized economic operator programs, simplified regimes for postal exports, single windows for foreign trade and regional schemes for international shipments are all trade facilitation policies that help unravel the border labyrinth and thus speed up the movement of goods across borders by streamlining administrative procedures and generally using new information technologies to implement these.

These policies, which are contemplated in the Trade Facilitation Agreement signed by the WTO Member Countries in Bali in 2013, are analyzed in detail in Out of the border labyrinth, an institutional report from the IDB’s Integration and Trade Sector. It puts forward new evidence on the impact of these policies based on transaction-level microdata that has never been used before. For the first time ever, this data allows us to observe these policies at the level at which they actually operate and analyze them using rigorous econometric methods. Future posts will discuss these policies further and examine their impacts on foreign trade in several Latin American countries.

If you would like to find out more about trade facilitation policies in Latin America and their effects on the trade performances of firms and countries, sign up for our newsletter here.


Filed Under: Trade Facilitation

Christian Volpe Martincus

Christian Volpe Martincus is Principal Economist at the Integration and Trade Sector of the Inter-American Development Bank. Christian has expertise in international trade, foreign direct investment, regional integration, and economic geography, and has advised several governments in both Latin America and the Caribbean and OECD countries on these matters. He previously worked for the Ministry of the Economy of the Province of Buenos Aires and was advisor at the MERCOSUR Commission of the National Representatives Chamber in Argentina. In addition, he was researcher at the Center for European Integration Studies in Bonn, Germany. At the IDB Christian has been working on the impacts of trade and investment facilitation and promotion policies, e-commerce, the effects of transport costs on trade flows, the implications of integration for specialization patterns, and the interplay between innovation and exports (https://www.christianvolpe.com/). His research has been published in various professional journals such as the Journal of International Economics and the Journal of Development Economics among others. Christian has a PhD in Economics from the University of Bonn, and is CESifo Research Fellow and Associate Editor of the Review of International Economics.

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Follow Us

Subscribe

Search

Integration Trade

On this blog, the IDB Integration and Trade Sector shares reflections on the role of trade, investment, cooperation, and regional integration for development in Latin America and the Caribbean. Subscribe and join the conversation.

Related posts

  • How long does it take to cross borders? From surveys and one-dimensional measures to big data
  • The Border Traffic Light: How Customs Processing Affects Trade
  • How Does Trade Respond When Borders Are Simplified via Single-Window Systems?
  • Why Orderly Relations with Neighboring Countries Are Important for Trade
  • The Authorized Economic Operator Program: Firm Steps toward Exporting to More and More Markets

Categories

Footer

Banco Interamericano de Desarrollo
facebook
twitter
youtube
youtube
youtube

Blog posts written by Bank employees:

Copyright © Inter-American Development Bank ("IDB"). This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives. (CC-IGO 3.0 BY-NC-ND) license and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed. Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC- IGO license. Note that link provided above includes additional terms and conditions of the license.


For blogs written by external parties:

For questions concerning copyright for authors that are not IADB employees please complete the contact form for this blog.

The opinions expressed in this blog are those of the authors and do not necessarily reflect the views of the IDB, its Board of Directors, or the countries they represent.

Attribution: in addition to giving attribution to the respective author and copyright owner, as appropriate, we would appreciate if you could include a link that remits back the IDB Blogs website.



Privacy Policy

Copyright © 2023 · Magazine Pro on Genesis Framework · WordPress · Log in

Banco Interamericano de Desarrollo

Aviso Legal

Las opiniones expresadas en estos blogs son las de los autores y no necesariamente reflejan las opiniones del Banco Interamericano de Desarrollo, sus directivas, la Asamblea de Gobernadores o sus países miembros.

facebook
twitter
youtube
This site uses cookies to optimize functionality and give you the best possible experience. If you continue to navigate this website beyond this page, cookies will be placed on your browser.
To learn more about cookies, click here
X
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non-necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

SAVE & ACCEPT